Spain’s public spending breaks records and settles above 50% of Gross Domestic Product (GDP). The country has thus accumulated two consecutive years – 2020 and 2021 – in which the average disbursement reaches 51.5%, after surpassing all historical spending milestones. However, the revenue figures do not match the expenditure figures and the public deficit is widening. In 2021, with record tax pressure and state revenue, revenue has not managed to exceed 43.7% of GDP, explains the newspaper El Economista, which reports data from the Intervención General de la Administración del Estado (General Comptroller of the State Administration). In 2020, liabilities reached 52.4% of GDP and in 2021 50.6%. Since 2007, Spain has not had a surplus and 14 years of imbalance, although the deficit between 2017 and 2019 was moderate.
The mismatch accelerated from 2020 as a consequence of the pandemic. In the years prior to 2019, spending was around 42% of GDP, almost ten points below current figures. In 2021, Spain closed the deficit at 6.76% of GDP after signing up for 10.08% the previous year.
Despite last year’s slight correction, spending in 2021 was 15.8% above that of 2019, with a notable dynamism of the components not linked to Covid-19 (6.9% compared to 2020). At the same time, public debt stood at 118.4% of GDP, 1.6 points lower than in 2020. The latest projections of the Bank of Spain (BdE), published on 5 April, anticipate a continuation of the improvement in the government balance. However, the BdE estimates that it will remain at high levels throughout the projection horizon.
“In the absence of a consolidation plan and given the foreseeable increase in expenditure linked to population ageing, public debt will tend to remain or increase in subsequent years, which poses a clear risk for the Spanish economy and its agents”, the BdE points out in a report published on 27 April. “Strengthening the sustainability of Spain’s public accounts will require the rigorous implementation of a multi-year fiscal consolidation plan”, it adds. “Such a plan should place special emphasis on the composition of the adjustment between revenue and expenditure, as this is crucial to minimise the adverse effects of fiscal consolidation on economic growth”, it concludes.
